Fed funds rate up, STI down

The Federal Reserve yesterday raised the federal funds rate to 1.50 percent from 1.25 percent.

The economy "appears poised to resume a stronger pace of expansion going forward," the Federal Open Market Committee, the central bank's top policymaking group, declared in its statement yesterday. The committee said that the recent "softness likely owes importantly to the substantial rise in energy prices."

US stock prices made their biggest gains in two months following the rate hike as many investors were encouraged by the Fed's optimistic outlook. The Dow Jones industrial average gained 130 points, or 1.3 percent.

Today, Asian stocks failed to show the same enthusiasm, closing mixed. Japan's Nikkei 225 rose 0.9 percent to 11,049.46. However, the Morgan Stanley Capital International's Asia-Pacific excluding Japan Index slid 0.5 percent.

In Singapore, the Straits Times Index fell 0.3 percent to close below the 1,900 level at 1,896.19. Losses were mitigated by gains by finance stocks, with the All-Singapore Equities Finance Index rising 0.6 percent, helped by good second quarter earnings for OCBC. The property sector took the brunt of the market's fall, the All-Singapore Equities Property Index plunging 3.2 percent.